What happened

Expedia (EXPE -1.85%) shareholders lost ground to the market this week. The travel booking giant's stock fell 20% through Thursday trading compared to a 0.2% drop in the S&P 500, according to data provided by S&P Global Market Intelligence.

The slump was driven by a poor reception by investors to its fiscal first-quarter earnings release.

A couple checking into a hotel.

Image source: Getty Images.

So what

Expedia said on Monday that its gross bookings jumped 58% compared to the same period in early 2021 when the travel industry was still in a deep recession due to social distancing efforts. This rebound helped push sales to $2.25 billion, up 81% year over year.

Yet Expedia still isn't enjoying the type of demand spike that many investors had been hoping to see following almost two years of deeply depressed travel volume. Gross bookings were still down 17% compared to pre-pandemic period, and net losses continued in Q1.

Now what

CEO Peter Kern and his team said there were reasons for optimism about an accelerating demand rebound in the peak summer travel season. These bright spots are being offset in part by geopolitical tensions, inflation, and slowing economic growth, potentially dampening the scale of the recovery in hotel bookings.

Executives broke down the sales trends by month in a conference call with investors, saying that hotel bookings were down 11% in January compared to the same period in 2019, but up 8% in February, 7% in March, and 10% in April.

Those trends do imply that Expedia will likely start setting booking records again, perhaps as early as Q2. But this travel rebound might not be as intense as some investors had hoped. And slowing economic growth rates are clouding the picture for the second half of 2022.

More clarity is on the way, which could quickly change Expedia's stock trajectory. But the bearish sentiment in the market today has convinced more investors to seek safety rather than simply waiting for sales conditions to improve.